Quipt Home Medical Corp. (“Quipt” or the “Company”) (NASDAQ:QIPT; TSXV:QIPT), a U.S. based leader in the home medical equipment industry, focused on end-to-end respiratory care, is pleased to announce that it has recently acquired three separate entities with combined operations in California, Missouri, Arkansas and Mississippi, reporting combined unaudited trailing 12-month annual revenues of approximately $5.5 million, and Adjusted EBITDA (defined below) of $550,000 prior to integration. As a reminder all figures stated are in USD.
Quipt is undertaking an ongoing national expansion effort with the goal of economically growing its operating footprint to serve as a leader in respiratory homecare across the United States. Quipt has built out a significant infrastructure platform which is highly scalable and allows the opportunity for the Company to efficiently integrate acquired businesses resulting in meaningful cost synergies and revenue growth opportunities.
Quipt’s acquisition approach generally targets companies that are either: (i) heavily respiratory weighted companies with gross revenue in the range of $5 to $20 million, and consistent annual EBITDA margins between 10% and 20% or more; (ii) sub $5 million revenue targets with the strategic goal of expanding our payer mix and expanding our geographical footprint across new states to be become a national DME provider; or (iii) targeting substantially larger opportunities that would be more meaningful in terms of revenue, EBITDA, active patient base and geographical operating footprint.
Quipt will operate each of the newly acquired entities under the Quipt brand name post-integration. This marks the start of a longer-term plan to transition certain local market brands to Quipt, as it strengthens its brand equity and recognition. Quipt believes this will be a driver of future organic growth.
Combining these newly acquired entities provides Quipt a pathway to grow into four new states (California, Missouri, Arkansas, and Mississippi). The combined entities will add six locations, over 10,000 active patients, important insurance contracts and decades of operating experience. Each business has a proven track record in the markets they serve and has diversified product mixes, which combined is comprised of 66% respiratory and 33% traditional DME. Quipt has immediate access to attractive new markets in which it intends to leverage its existing infrastructure to create significant cross selling and patient growth opportunities. In addition, the combined entities give Quipt the opportunity to add patients to Quipt’s existing subscription-based resupply program, and Quipt expects to derive strong revenue synergies from this initiative. The combined entities have a diverse payor mix with no more than 10% in sales coming from any one particular payor source.
The Company is pleased to share the following updated metrics taking into consideration the three newly acquired entities:
- 130,000 current active patients;
- 17,000 unique referrals; and
- 57 locations across 15 U.S. States.
Under the terms of the definitive purchase agreements, Quipt acquired the three combined entities for total consideration of approximately $4.2 million in cash. It is expected that the combined entities will increase Quipt’s annual gross revenues by approximately $5.5 million and Adjusted EBITDA (as defined below) will normalize to be in-line with the Company’s overall margin profile. Leveraging existing infrastructure and payor contracts, Quipt expects to achieve additional revenue generated from organic growth, cross selling, and corporate synergies.
“The closing of three acquisitions with operations spanning over four states represent the beginning of what we anticipate will be a busy second half of the year at Quipt, as we strategically aim to expand our operating footprint into attractive new and existing markets. We are focused on economically scaling the business, with our acquisition strategy, and robust organic growth platform,” said Greg Crawford, Chairman and CEO of Quipt. “We are excited to build our brand into local markets, dedicated to exceptional patient care, and expect a smooth integration process that will allow us to move quickly to capture the many synergies available to us. We are able to add six new locations, over 10,000 active patients, and $5.5 million in gross revenue through these acquired entities providing us meaningful infrastructure in these new areas of service.”
Chief Financial Officer, Hardik Mehta added, “Our acquisition focus continues to be on companies with a heavily weighted respiratory product mix, diversification of payor mix, and a stable foundation for Quipt to build out its operations, utilizing existing infrastructure. Our goal is to double the Adjusted EBITDA margin post integration of the combined entities, aligning more closely with our overall margin profile. We are excited to have the opportunity to penetrate these new states both organically and through strategic bolt-on opportunities that present themselves. With approximately $37 million in cash and untapped credit facility of $20 million, we believe this is just the beginning of what will be a strong acquisition pace for us over the remainder of 2021.”